Kirgiz & Carretto (No 2)
[2024] FedCFamC1F 91
•26 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Kirgiz & Carretto (No 2) [2024] FedCFamC1F 91
File number(s): DGC 458 of 2020 Judgment of: JOHNS J Date of judgment: 26 February 2024 Catchwords: FAMILY LAW – PROPERTY – binding financial agreement – threshold issue – validity of binding financial agreement – where the parties entered into two financial agreements within 3 days – where the parties agree the first agreement does not comply with the provisions of the Family Law Act 1975 (Cth) – where the second agreement was entered into two days prior to the parties’ marriage – where the wife seeks to enforce the second agreement – where the husband seeks that the second agreement be set aside on the basis of duress, undue influence or unconscionable conduct – where duress is not established – where undue influence or unconscionable conduct are not established Legislation: Evidence Act 1996 (Cth) s 140
Family Law Act 1975 (Cth) ss 90B, 90G, 90K, 102NA
Cases cited: Australia and New Zealand Banking Group & Karem (2005) 64 NSWLR 149
Hoult & Hoult (2013) FLC 93-546
Kirgiz & Carretto [2022] FedCFamC1F 299
Logan & Logan (2013) FLC 93-555
Thorne v Kennedy (2017) 263 CLR 85
Division: Division 1 First Instance Number of paragraphs: 105 Date of last submission/s: 24 March 2023 Date of hearing: 28 April 2022; 13-14 July 2022; 3 November 2022; 30 January 2023; 24 March 2023 Place: Melbourne Counsel for the Applicant: Mr Murphy Solicitor for the Applicant: Zenith Lawyers and Consultants Counsel for the Respondent: Mr Stark, Mr Howe & Mr Peters Solicitor for the Respondent: RRR Lawyers ORDERS
DGC 458 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS KIRGIZ
Applicant
AND: MR CARRETTO
Respondent
ORDER MADE BY:
JOHNS J
DATE OF ORDER:
26 FEBRUARY 2024
IT IS DECLARED THAT the Financial Agreement signed by the applicant and the respondent and dated 3 October 2002 is a binding financial agreement within the meaning of Pt VIIIA of the Family Law Act 1975 (Cth).
THE COURT ORDERS:
1.That paragraphs 1, 2 and 3 of the Amended Response to Application for Final Orders filed by the respondent on 9 March 2021 (and re-filed on 15 October 2021) be dismissed.
2.That all extant applications be listed for mention before the Honourable Justice Johns at 10.00 a.m. on 18 March 2024.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Kirgiz & Carretto has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
The applicant wife, Ms Kirgiz, and the respondent husband, Mr Carretto, married in 2002. Prior to their marriage they executed two agreements, the first described as a “Pre-Nuptial Agreement” dated 30 September 2002 (“the First Agreement”) and the second, a Financial Agreement dated 3 October 2002 (“the Second Agreement”). The applicant wife seeks to enforce her rights under the Second Agreement, which she contends is a valid Binding Financial Agreement within the meaning of Part VIIIA of the Family Law Act 1975 (Cth) (“the Act”).
As part of her application to enforce the Second Agreement, the wife has brought an application to join the husband’s brother, Mr B, as a party to the proceedings. The wife alleges that the husband has transferred property to his brother to defeat her claim for enforcement, and therefore seeks that the transfer of property be set aside.
The respondent husband seeks orders that the Second Agreement be set aside on the basis that it was entered into as a result of duress, undue influence, or unconscionable conduct by the wife.
Given the complexity of the dispute between the parties, particularly with the potential involvement of a third party, it was agreed between the parties that there should be a threshold hearing prior to the hearing of the wife’s application for joinder and enforcement to determine the status of the two agreements; that is whether they are binding financial agreements within the meaning of s 90B of the Act.
For the reasons that follow I am satisfied that:-
(a)The First Agreement is not a Binding Financial Agreement within the meaning of Part VIIIA of the Act;
(b)The Second Agreement is a Binding Financial Agreement within the meaning of s 90B of the Act; and
(c)The husband’s application to set aside the Second Agreement on the basis of duress, undue influence or unconscionable conduct ought be dismissed.
These are my reasons for judgment with respect to those decisions.
THE HEARING
Proceedings were commenced by the wife’s Application for Final Orders dated 12 February 2020. In that application, the wife sought the enforcement of the Second Agreement dated 3 October 2002.
The matter has had an unfortunate procedural history. The impact of the COVID-19 pandemic necessitated delays in the commencement of the hearing as the wife required the assistance of interpreters in the conduct of the matter. Those difficulties were compounded as both parties represented themselves at various stages of the proceedings and at times, failed to comply with the orders and directions of the Court.
The matter was first assigned to my docket in December 2020 and came before me for a First Day Hearing on 29 March 2021. That day, I ordered that the threshold issue, that is, the question of whether the agreements dated 30 September 2002 and 3 October 2002 are Binding Financial Agreements within the meaning of the Act, be listed for a two-day hearing to commence on 24 August 2021. At that time, the husband had lawyers whilst the wife was self-represented.
The matter was called on for mention to ascertain its readiness on 29 July 2021. That day, the wife appeared before the Court via Microsoft Teams. Upon hearing submissions, the final hearing was adjourned due to concerns raised by the husband’s then recently appointed lawyer as to whether a litigation guardian should be appointed for the husband. In addition, the wife, who was self-represented, informed the Court that she was living in Country C, had not expected to be required to return to Australia for the final hearing, and expected to appear electronically at the final hearing. Given the nature of the issues in dispute and the fact that the wife was self-represented and required the assistance of an interpreter, it was determined that the matter should not proceed electronically.
The matter was again called on for mention on 6 October 2021. Shortly prior to that event, on 1 October 2021, the husband’s lawyers filed a Notice of Ceasing to Act. Accordingly, both parties were self-represented at that mention hearing. Given that position and having regard to the complex legal arguments raised by each, I expressed concerns as to their capacity to conduct the final hearing without representation. Further, notwithstanding previous orders, the husband had failed to comply with my trial directions regarding the filing of material.
That day, I made orders listing the threshold issue for a two-day hearing to commence on 4 April 2022. I also extended time for the parties’ compliance with my trial directions. Those orders included a Notation in the following terms:-
A. That the respondent has informed the Court this day:
(i) That he intends to obtain legal representation for the final hearing; and
(ii) That he does not believe he requires a case guardian.
B. That the respondent has been informed by the Court this day:
(i)That the issue of whether he requires a case guardian must be resolved prior to the trial date and in the event that no steps have been taken by him or his lawyers to resolve that issue prior to the trial, there is unlikely to be any further adjournment of the proceedings to resolve that matter; and
(ii)In the event that he fails to comply with these trial directions the applicant may seek leave to proceed on an undefended basis.
Despite previously being informed by the Court that she was required to attend in person at the final hearing, on 3 April 2022, the wife filed a Notice of Request to Attend by Electronic Communication. That request was refused.
The matter was relisted for final hearing on 28 April 2022. On 24 April 2022, the wife filed a further Request to Attend by Electronic Communication. Again, that request was refused.
On 28 April 2022, the husband appeared in Court, representing himself. The wife made no appearance and did not answer upon being called in the Court precincts. I directed that my Legal Associate attempt to contact the wife to ascertain whether she would be attending Court that day. The wife sent an email to my Chambers at 10:07am which read as follows:-
Good morning, unfortunately I get sick (sic), and I sent you many messages and an application for electronic communication, I sent to the Commonwealth Courts website message that I can not attend tomorrow Final Hearing by person (sic), only electronic communication as I get sick, a huge fever, headache and fatigue…
A Microsoft Teams link was provided to the wife to allow her to appear and further explain her position. It became immediately apparent that the wife remained in Country C and in response to my questioning of such, she informed the Court that the airline she was to travel with had refused her passage as she was exhibiting flu-like symptoms. The wife’s position was that notwithstanding her illness, she was ready and able to proceed electronically.
In light of the wife’s failure to attend in person, the failure of the husband to file his trial material, and the wife’s inability to direct me to the documents she relied upon in support of her case, regrettably the proceedings were further adjourned. That day, I delivered Ex-Tempore Reasons for Judgment and put the husband on notice that the matter would likely proceed on an undefended basis at the adjourned hearing if he failed to comply with orders to file the requisite material.[1]
[1] Kirgiz & Carretto [2022] FedCFamC1F 299.
When the matter returned for its further listed hearing date on 13 July 2022, the husband was represented by Counsel. The wife was again self-represented and was assisted by an interpreter.
The matter commenced that day. Counsel for the husband conceded that the First Agreement dated 30 September 2002 did not meet the requirements of Part VIIIA of the Act. As to the Second Agreement dated 3 October 2002, the husband’s Counsel submitted that it should be set aside on the basis of undue influence, unconscionable conduct or duress exerted by the wife.
On the second day of hearing, Counsel for the husband sought to adduce further evidence as to the husband’s financial circumstances on the basis that if found to be valid, the Second Agreement ought to be set aside pursuant to s 90K(1)(c) of the Act. It was submitted on behalf of the husband that given his asserted parlous financial position it is impracticable for the Second Agreement to be carried out. Counsel for the husband submitted that given the husband had been self-represented for a significant period of the proceedings, he should be afforded some leeway with respect to adducing such evidence.
In circumstances where both parties were self-represented until shortly prior to the commencement of the final hearing and having regard to the lack of material before the Court with respect to that issue, I deemed it appropriate to adjourn the hearing part-heard to enable each party to file further evidence in relation to that issue. The matter was listed for a further day of hearing on 3 November 2022.
The husband failed to file any further evidence in accordance with those orders.
On 3 November 2022, the wife again did not attend Court. I was informed that in mid-2022 the wife was granted a Final Family Violence Intervention Order against the husband. That order was made in the Magistrates’ Court of Victoria. As a result, the provisions of s 102NA of the Act were enlivened upon the making of that order.
The wife appeared electronically via Microsoft Teams on 3 November 2022 and sought to proceed with the hearing. The wife confirmed her intention to cross-examine the husband. Given that position, orders were made pursuant to s 102NA of the Act and the hearing was otherwise adjourned to 30 January 2023 to enable the parties to make application for legal assistance pursuant to the Commonwealth Family Violence and Cross-Examination of Parties Scheme.
Upon the resumption of the hearing on 30 January 2023, both parties were represented by Counsel. The wife did not attend Court and a request was made that she attend electronically. No request was made to my Chambers for such to occur prior to the adjourned hearing date. I was informed by Counsel for the wife that his client was presently residing in Region D. I stood the matter down and made a direction for her attendance at Court. Upon return some 1.5 hours later, the wife had still not appeared at Court, and I was informed by her Counsel that she would not be able to do so. As a result, the matter was further adjourned, and the respondent’s costs were fixed in the sum of $2,373 and reserved.
The hearing finally resumed on 24 March 2023. On this occasion, the husband had different Counsel representing him, the third to do so throughout the course of the final hearing. It was confirmed by the husband’s new Counsel that his client conceded that the First Agreement did not comply with the requirements of the Act, whilst the Second Agreement of 3 October 2002 did so comply with those requirements. Thus, the issue for determination was whether the Second Agreement should be set aside as a result of it having been entered into due to duress, undue influence or unconscionable conduct by the wife.
The contention previously raised on behalf of the husband that the Second Agreement should be set aside pursuant to s 90K(1)(c) of the Act was not pressed upon the resumption of the final hearing.
MATERIAL RELIED UPON
The applicant wife relies upon the following documents:-
·Written Submissions dated 3 November 2022;
·Amended Application for Final Orders filed 29 April 2021;
·Further Amended Application for Final Orders filed 25 January 2023;
·Affidavit of the wife filed 15 October 2022;
·Affidavit of the wife filed 1 July 2022;
·Affidavit of the wife filed 24 May 2021;
·Affidavit of the wife filed 12 February 2020;
·Outline of Case Document filed 27 April 2022; and
·Documents tendered at hearing (Exhibits A1 to A7 inclusive).
The respondent husband relies upon the following documents:-
·Amended Response to Application for Final Orders filed 15 October 2021;
·Affidavit of the Respondent sworn 5 July 2022;
·Affidavit of the Respondent filed 22 August 2022;
·Written Submissions filed 3 November 2022; and
·Documents tendered during hearing (Exhibits R1 to R5 inclusive).
ORDERS SOUGHT
The applicant wife seeks a declaration that the Second Agreement dated 3 October 2002 is a Binding Financial Agreement within the meaning of Part VIIIA of the Act. If successful, the wife intends to pursue her application to enforce her rights under the Second Agreement.
The respondent husband seeks that the Second Agreement be set aside pursuant to s 90K(1) of the Act.
ISSUES
In light of the concessions made throughout the course of hearing that the First Agreement, dated 30 September 2002, is not a valid Binding Financial Agreement (as it does not comply with the requirements of the Act), the only issues remaining for determination in relation to the Second Agreement is whether:-
·the husband received independent legal advice in accordance with the provisions of s 90G of the Act as to the effect of the agreement and the advantages and disadvantages of making the agreement;
·it should be set aside on the basis of duress, undue influence or unconscionable conduct, as claimed by the husband.
THE EVIDENCE
In determining the matter, the relevant standard of proof is the balance of probabilities. Section 140(2) of the Evidence Act 1995 (Cth) provides that, without limiting the matters the Court may take into account in applying that standard of proof, the Court must take into account:-
(a)The nature of the cause of action or defence; and
(b)The nature of the subject-matter of the proceeding; and
(c)The gravity of the matters alleged.
I have read all documents upon which the parties have relied and the exhibits that were tendered during the hearing.
In what follows, statements of fact constitute findings of fact. In determining the matter, I have had regard to all of the evidence and had the benefit of observing the appearance and the demeanour of the husband and the wife. I have carefully considered the matter and in making findings to the requisite standard, I have had regard to all of the evidence, the nature of the proceedings, the seriousness of the allegations and the consequences that flow from my findings.
BACKGROUND
The applicant wife, Ms Kirgiz, was born in Country C in 1973 and is aged 50 years. At the time of hearing the wife was unemployed.
The respondent husband, Mr Carretto, was born in Country E in 1955 and is aged 68 years. He was also unemployed at the time of hearing.
The parties married in 2002. At that time, the wife was aged 29 years, and the husband was aged 47 years. The wife contends the parties separated in May 2019, albeit that she admits that she lived in Europe between 2005 and 2018 whilst the husband lived in Australia. The husband alleges that separation occurred in 2005.
There are no children of the marriage.
The First Agreement
On 30 September 2002, five days prior to the marriage, the parties executed the First Agreement at the offices of Mr F, Lawyer. The wife deposes that the parties commenced discussing the preparation of that agreement, as well as the Second Agreement in about August 2002, shortly prior to the parties’ wedding.[2]
[2] Wife’s affidavit filed 15 October 2022, paragraph 25.
There is no dispute that the First Agreement was prepared by Mr F, Lawyer. During his oral evidence the husband acknowledged that Mr F was the solicitor routinely engaged by his mother in relation to the management of her personal affairs.
The First Agreement records the property of each of the parties at Recitals A and B. The husband disclosed interests in five real properties and shareholdings in an entity that operated two retail businesses. The wife disclosed interests in a superannuation policy, and some personal effects, and jewellery estimated to be valued at $5,000. Hence, at the time of the execution of the First Agreement, based on the assets disclosed by the parties in the First Agreement, I am satisfied that the husband was in a much stronger financial position than the wife.
The First Agreement provides that each party makes no claim to the property of the other brought into the relationship, and further makes provision as to how property acquired jointly by the parties during the relationship is to be divided in the event of their separation.
The wife’s evidence is that she did not have the assistance of an interpreter at the time she executed the First Agreement.[3]
[3] Wife’s affidavit filed 15 October 2022, paragraph 25.3.
The wife deposes that the parties entered into the First Agreement out of “respect” for the husband’s mother. The wife expanded upon this during her oral evidence confirming that the parties signed the First Agreement to appease the husband’s mother who was concerned to protect the husband’s position. Later in her oral evidence, the wife stated that she was subject to pressure from the husband’s mother, and that she had been advised by her lawyer that the First Agreement was unfair to her but due to the pressure from the husband and his mother, she executed it anyway.
The wife also stated that at the time she attended the offices of Mr F to execute the First Agreement, the husband’s mother also attended and was present during discussions between the parties and Mr F about the agreement.
During cross-examination by the wife, the husband conceded that Mr F had acted for him in relation to other matters and that he had been his family’s lawyer for a long time. He confirmed that Mr F was also his mother’s lawyer. Further, the husband confirmed that he had suggested a financial agreement to his mother who confirmed that it was a good idea. On that basis, the husband and his mother engaged Mr F to draft the agreement.
The First Agreement does not purport to be a Binding Financial Agreement pursuant to Part VIIIA of the Act. It acknowledges that the agreement is subject to the provisions of the Act. Further, at Clause 19 it states:-
Each party understands that this intention does not bind a Court under the provisions of Pt. VIII of the Family Law Act 1975 (Cth) but express this intention as a factor relevant to the exercise of judicial discretion under Pt. VIII, or any legislation which replaces that part of the Family Law Act 1975.
Hence, it is evident on its face that the First Agreement is not a Binding Financial Agreement. That this is so was conceded by the husband through his lawyer during the hearing.
The Second Agreement
Curiously, some three days following the execution by the parties of the First Agreement, on 3 October 2002 the Second Agreement was entered into by them.
The Second Agreement was prepared by Mr G, legal practitioner and Accredited Family Law Specialist of H Lawyers. The Second Agreement purports to be an agreement entered into pursuant to s 90B of the Family Law Act (Cth) 1975; that is, it is a financial agreement entered into before a marriage.[4]
[4] Wife’s affidavit filed 12 February 2020, Clause B of the Second Agreement, page 13.
The parties’ assets are particularised in the Second Agreement, at Schedule 1 in relation to the husband, and Schedule 2 in respect of the wife. The husband discloses real property, shareholdings, a motor vehicle, and jewellery valued at approximately $3,520,000.[5] The wife discloses assets valued at approximately $40,000.[6] Hence, a significant disparity in the parties’ financial circumstances is disclosed in the Second Agreement.
[5] Wife’s affidavit filed 12 February 2020, Schedule 1 of the Second Agreement, page 23.
[6] Wife’s affidavit filed 12 February 2020, Schedule 2 of the Second Agreement, page 24.
The Second Agreement sets out how the parties’ property is to be divided in the event of the breakdown of their relationship. It provides that each party will be entitled to their separate property as identified in the Schedules, and any property jointly acquired during the marriage shall be held by them in accordance with the title and in the absence of a title document will be deemed to jointly held. In the event of the breakdown of the relationship, the Second Agreement provides that such property will be divided in accordance with the proportions held by them.[7]
[7] Wife’s affidavit filed 12 February 2020, Clause Z of the Second Agreement, page 16.
Further, the Second Agreement provides at Clause HH that:-
Throughout the currency of the cohabitation, [the husband] shall provide to [the wife] the sum of $500.00 per week for her own use and expenditure as she sees fit in addition to providing appropriate standard of living for the family including day to day expenditure, entertainment, holidays etc.
The husband executed the Second Agreement in the presence of his solicitor, Mr G.[8] During cross-examination the husband confirmed that Mr G witnessed his signature on the document.
[8] Husband’s affidavit filed 5 July 2022, paragraph 21.
Attached to the Second Agreement is a Certificate of Independent Legal Advice signed by Mr G dated 3 October 2002.
That Certificate records that Mr G has advised the husband independently of the wife and before the time the husband signed the agreement as to:-
1.The effect of the agreement on the rights of the parties to apply for an order under the provisions of the Family Law Act 1975, the Family Law Amendment Act 2000, and otherwise at law and in equity.
2.Whether or not at that time it was to the advantage, financially or otherwise, for him to enter into the agreement.
3.Whether or not at that time it was prudent for him to enter into the agreement.
4.Whether or not, at that time and in the light of such circumstances as were reasonably foreseeable, the provisions of the agreement were fair and reasonable.[9]
[9] Wife’s affidavit filed 12 February 2020, the Second Agreement, page 21.
An identical Certificate of Independent Legal Advice signed by the wife’s lawyer, Ms J of K Lawyers dated 1 October 2002 is also attached to the agreement.[10]
[10] Wife’s affidavit filed 12 February 2020, the Second Agreement, page 22.
IS THE SECOND AGREEMENT A BINDING FINANCIAL AGREEMENT?
It is contended by the wife that the Second Agreement is a financial agreement entered into in accordance with the provisions of s 90B of the Act.
Whilst Recital 9 to the Second Agreement states that it is binding under s 90C of the Act, at Clause B of the agreement it states that it is entered into pursuant to s 90B of the Act.[11] Neither party raised that apparent error in the Recital during the hearing, and it would seem little turns on that issue, particularly in circumstances where it is common ground that the Second Agreement was entered into in contemplation of the parties’ marriage. Although neither the husband nor the wife raised issue with that error, in my view had application been made, it is an error capable of rectification.
[11] Wife’s affidavit filed 12 February 2020, the Second Agreement, page 13.
Section 90B of the Act provides as follows:-
(1) If:
(a)people who are contemplating entering into a marriage with each other make a written agreement with respect to any of the matters mentioned in subsection (2); and
(aa)at the time of the making of the agreement, the people are not the spouse parties to any other binding agreement (whether made under this section or section 90C or 90D) with respect to any of those matters; and
(b) the agreement is expressed to be made under this section;
the agreement is a financial agreement. The people may make the financial agreement with one or more other people.
(2) The matters referred to in paragraph (1)(a) are the following:
(a)how, in the event of the breakdown of the marriage, all or any of the property or financial resources of either or both of the spouse parties at the time when the agreement is made, or at a later time and before divorce, is to be dealt with;
(b) the maintenance of either of the spouse parties:
(i) during the marriage; or
(ii) after divorce; or
(iii) both during the marriage and after divorce.
(3) A financial agreement made as mentioned in subsection (1) may also contain:
(a)matters incidental or ancillary to those mentioned in subsection (2); and
(b) other matters.
(4)A financial agreement (the new agreement) made as mentioned in subsection (1) may terminate a previous financial agreement (however made) if all of the parties to the previous agreement are parties to the new agreement.
It is common ground that at the time the parties executed the Second Agreement they were not married but were contemplating entering marriage and that they were not parties to any other binding agreement with respect to property or maintenance. Further, I am satisfied that the Second Agreement provides for how the parties’ property and financial resources are to be dealt with in the event of the breakdown of the marriage. I am also satisfied that the Second Agreement addresses issues as to the maintenance of the parties, both during the marriage and in the event of the breakdown of the marriage. Having regard to those matters, I am satisfied that the Second Agreement is an agreement entered into pursuant to s 90B of the Act.
Section 90G of the Act identifies when financial agreements are binding on the parties. It provides that:-
(1)Subject to subsection (1A), a financial agreement is binding on the parties to the agreement if, and only if:
(a) the agreement is signed by all parties; and
(b)before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and
(c)either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph (b) was provided to that party (whether or not the statement is annexed to the agreement); and
(ca)a copy of the statement referred to in paragraph (c) that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and
(d)the agreement has not been terminated and has not been set aside by a court.
Note: For the manner in which the contents of a financial agreement may be proved, see section 48 of the Evidence Act 1995.
(1A) A financial agreement is binding on the parties to the agreement if:
(a) the agreement is signed by all parties; and
(b) one or more of paragraphs (1)(b), (c) and (ca) are not satisfied in relation to the agreement; and
(c) a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement (disregarding any changes in circumstances from the time the agreement was made); and
(d)the court makes an order under subsection (1B) declaring that the agreement is binding on the parties to the agreement; and
(e)the agreement has not been terminated and has not been set aside by a court.
(1B)For the purposes of paragraph (1A)(d), a court may make an order declaring that a financial agreement is binding on the parties to the agreement, upon application (the enforcement application) by a spouse party seeking to enforce the agreement.
(1C)To avoid doubt, section 90KA applies in relation to the enforcement application.
(2)A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.
DID THE HUSBAND RECEIVE INDEPENDENT LEGAL ADVICE?
At issue is the question of whether the husband received independent legal advice as to the effect of the Second Agreement and its advantages and disadvantages; he contends that he did not.
The wife relies upon the Certificates of Independent Legal Advice attached to the Second Agreement in support of her contention that the parties each obtained independent legal advice prior to signing the Second Agreement. In addition, she relies upon correspondence forwarded to the husband by his lawyer, Mr G dated 27 September 2002.[12] In that correspondence the husband’s lawyer advises him as follows:-
…
We discussed with you whether at the time you are to sign the agreement, it will be to your advantage to enter into the agreement. On the basis of your instructions and that which you seek to achieve by entering into the agreement, we have advised you that the agreement, in our opinion, is to your advantage. We are unable to give you financial advice and you have, therefore, made your own decision as to the financial advantage or disadvantage of the agreement.
We have further discussed whether it is prudent for you to enter into this agreement. We have advised you that, in our opinion, it is prudent to enter into the agreement. We confirm that you have formed your own view as to whether the agreement suits your interest and is prudent in all of the circumstances to enter into it.
We have advised you whether or not at the time you are to enter into the agreement and in light of such circumstances as are at that time reasonably foreseeable, the provisions of the agreement are fair and reasonable. We have discussed the circumstances which are reasonably foreseeable in your particular relationship and those which are reasonably foreseeable in most relationships to enable you to make a decision as to whether the agreement is fair and reasonable. We have advised that, in our opinion, at the time you are to sign the agreement and in light of the circumstances as are, at that time, reasonably foreseeable, the provisions of the agreement are not fair and reasonable. We advise that it is likely [the wife] may be able to set the agreement aside.
…
Prior to signing the agreement, we have questioned you about the possibility of duress and you have stated to us that you understand the nature and effect of the agreement and the obligations and risks involved in signing the agreement. It appears to us that you have such an understanding. You have clearly stated to us that you will be signing the document freely, voluntarily and without pressure from your partner or from any other person.
We request that you sign the enclosed copy of this letter acknowledging the advice you have received.
[12] Wife’s affidavit filed 1 July 2022, Annexure B, pages 12 – 13.
A further letter was provided by Mr G to the husband following the husband’s execution of the Second Agreement on 3 October 2002.[13] That correspondence confirmed the execution of the Second Agreement, the terms of the agreement, the husband’s obligations under the agreement and provided the husband with an account for services rendered.
[13] Wife’s affidavit filed 1 July 2022, Annexure B, page 14.
The invoice for services rendered by the husband’s lawyer dated 3 October 2002 details attendances by Mr G on 26 September, 27 September, 30 September and 1 October 2002. The services provided included:-
·The drafting of the agreement and Letter of Advice, and “talking” with the husband on 27 September 2002;
·The drafting of amendments to the agreement and letter to the wife’s lawyers, and “talking” with the husband on 30 September 2002; and
·Drafting amendments to the agreement, calls to the wife’s lawyers and “talking” with the husband on 1 October 2002.
The bill for services rendered was $2,588.74.[14]
[14] Wife’s affidavit filed 1 July 2022, Annexure B, page 15.
The husband confirmed during cross-examination that he had paid the bill rendered by Mr G for his services provided in relation to the preparation and execution of the Second Agreement following his attendance to sign the document. Nonetheless, the husband now maintains that the Second Agreement should be set aside as it was entered into as a result of duress and the wife’s undue influence or unconscionable conduct.
The husband deposes that he did “not receive any legal advice from [Mr G] (sic) as to the meaning and effect of the second Agreement”.[15] The husband complains that the preparation of the Second Agreement was “very rushed” because the parties were marrying soon and as a result, he did not have time to “properly read the second agreement”.
[15] Husband’s affidavit filed 5 July 2022, paragraph 21.
The wife rejected the proposition that the husband was rushed to execute the Second Agreement or that he felt pressured into signing that agreement. The wife maintained that she did not have any power over the husband in relation to the preparation or execution of the Second Agreement; Mr G was engaged by and acted for the husband, and the wife had her own lawyer.
The wife also rejected the proposition that the husband had not received the Letter of Advice from Mr G dated 27 September 2002.
Neither the husband nor the wife called Mr G to give evidence in relation to the work undertaken by him on behalf of the husband in relation to the Second Agreement, or as to the circumstances leading up to its execution.
Nonetheless, the husband maintained that he had not received legal advice in relation to the Second Agreement. That evidence was given in the face of the Letters of Advice forwarded by the husband’s lawyer, Mr G, to him dated 27 September 2002 and 3 October 2002. It was also maintained notwithstanding the husband’s admission that he paid Mr G’s bill in the sum of $2,588.74 for services in relation to the preparation of the Second Agreement.
The bill the husband admits paying clearly identifies that Mr G drafted a Letter of Advice, and that he spoke with the husband on 27 September, 30 September and 1 October 2002, and attended upon him to execute the document on 3 October 2002. In light of the husband’s action in paying for those services, I do not accept his contention that those services were not rendered by Mr G.
Ordinarily, the party seeking to uphold a financial agreement bears the onus of proof. However, once a party relies on a Certificate or Statement of Independent Legal Advice to establish that the necessary legal advice has been given, the onus shifts to the party seeking to establish that the advice has not been given (per Hoult & Hoult (2013) FLC 93-546 (“Hoult”)). This was confirmed by Thackray J (with whom Strickland and Ainsle-Wallace JJ concurred) at [62] of Hoult where His Honour stated:-
…I consider that once the party seeking to rely upon the agreement produces in evidence the certificate signed by the other party’s solicitor, there is a forensic obligation on the other party to adduce evidence which would disprove, or at least throw into doubt, the inference or conclusion to be drawn from the certificate (especially when read with the recital in the agreement to the same effect).
Those principles were subsequently approved by the Full Court in Logan & Logan (2013) FLC 93-555.
The husband does not dispute that he met with Mr G in relation to the Second Agreement. However, the husband gives no evidence as to what was discussed during those meetings, but instead, merely makes a broad assertion that he was not given legal advice.
In my view, the failure of the husband to adduce evidence from Mr G as to the circumstances in which the agreement was prepared and executed is a significant omission in his case in light of his own evidence and the evidence adduced by the wife, particularly the Certificate of Independent Legal Advice signed by Mr G attached to the Second Agreement, the Letter of Advice dated 27 September 2002, and Mr G’s invoice. Having regard to the totality of that evidence, I do not accept the husband’s contention that he did not receive independent legal advice as to the Second Agreement prior to its execution.
Accordingly, I am satisfied that the husband did obtain independent legal advice in relation to the Second Agreement in accordance with the provisions of s 90G of the Act.
DURESS
The husband maintains that the agreement ought be set aside pursuant to s 90K of the Act.
Section 90K of the Act provides as follows:-
(1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
(a)the agreement was obtained by fraud (including non-disclosure of a material matter); or
(aa) a party to the agreement entered into the agreement:
(i)for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii)with reckless disregard of the interests of a creditor or creditors of the party; or
(ab)a party (the agreement party) to the agreement entered into the agreement:
(i)for the purpose, or for purposes that included the purpose, of defrauding another person who is a party to a de facto relationship with a spouse party; or
(ii)for the purpose, or for purposes that included the purpose, of defeating the interests of that other person in relation to any possible or pending application for an order under section 90SM, or a declaration under section 90SL, in relation to the de facto relationship; or
(iii)with reckless disregard of those interests of that other person; or
(b) the agreement is void, voidable or unenforceable; or
(c)in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or
(d)since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or
(e)in respect of the making of a financial agreement—a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or
(f)a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
(g)the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB.
(1A) For the purposes of paragraph (1)(aa), creditor, in relation to a party to the agreement, includes a person who could reasonably have been foreseen by the party as being reasonably likely to become a creditor of the party.
(2) For the purposes of paragraph (1)(d), a person has caring responsibility for a child if:
(a) the person is a parent of the child with whom the child lives; or
(b) a parenting order provides that:
(i) the child is to live with the person; or
(ii) the person has parental responsibility for the child.
(3)A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.
(4)An order under subsection (1) or (3) may, after the death of a party to the proceedings in which the order was made, be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(5)If a party to proceedings under this section dies before the proceedings are completed:
(a)the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings; and
(b) if the court is of the opinion:
(i)that it would have exercised its powers under this section if the deceased party had not died; and
(ii) that it is still appropriate to exercise those powers;
the court may make any order that it could have made under subsection (1) or (3); and
(c)an order under paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(6) The court must not make an order under this section if the order would:
(a)result in the acquisition of property from a person otherwise than on just terms; and
(b) be invalid because of paragraph 51(xxxi) of the Constitution.
For this purpose, acquisition of property and just terms have the same meanings as in paragraph 51(xxxi) of the Constitution.
The husband contends that the Second Agreement was entered into as a result of duress by the wife or as a result of the wife’s undue influence or unconscionable conduct. As such, it is the husband’s position that the Second Agreement should be declared void, voidable or unenforceable.
In his affidavit filed 5 July 2022, the husband deposes that he did not read the Second Agreement “properly” and further deposes that he signed it “under duress” because the wife was saying to him that if he did not agree to sign it, she would not try and have a family/children with him, as she did not feel secure unless he signed the document.[16]
[16] Husband’s affidavit filed 5 July 2022, paragraph 19.
During cross-examination the wife denied the husband’s allegations that she had threatened to walk away from the marriage or that she would not provide children if the husband did not sign the Second Agreement.
The question of duress was considered in Australia and New Zealand Banking Group & Karem (2005) 64 NSWLR 149 (“Karem”). That case confirms that in order to establish duress, what is required is threatened or actual unlawful conduct. The decision of Karem was considered by the plurality of the High Court in Thorne v Kennedy (2017) 263 CLR 85. The High Court did not overrule the principles established in Karem.
The husband’s evidence is that the wife threatened that she would not marry the husband unless he entered into the Second Agreement. It was submitted that as a single man in his late forties, the husband viewed his pending marriage to the wife to be his “last opportunity” to have a family. Further, it was also submitted that he would suffer embarrassment were he to be “left at the altar” by the wife. That, it was submitted, was the duress that he was subjected to by the wife.
The wife denies those allegations and rejects the proposition that the marriage between the parties was the husband’s “last opportunity” to have children. Other than vague assertions as to the wife’s alleged behaviour, the husband does not particularise his claims as to the wife’s threats. Further, the contention that this relationship was the husband’s “last opportunity” to have a family does not withstand scrutiny; the husband was aged 47 years at the time the Second Agreement was executed. Accordingly, I prefer the evidence of the wife with respect to these matters.
Even were the husband to establish the matters contended by him as to the wife’s conduct, on any view such conduct does not amount to duress as contemplated at common law. Having regard to the husband’s evidence, I am satisfied that even if accepted at its highest, it does not establish threatened or actual unlawful conduct by the wife.
Accordingly, the husband’s allegations as to duress by the wife must fail.
UNDUE INFLUENCE AND UNCONSCIONABLE CONDUCT
In the alternative, the husband contends that the Second Agreement is vitiated by undue influence or unconscionable conduct.
The factual foundations for undue influence and unconscionable conduct may arise from the same set of facts. Gordon J, in Thorne v Kennedy (supra) stated:
86.…[T]he two doctrines may be engaged by the same set of facts; the point, rather, is the focus of the enquiry is different …
As to undue influence the plurality in Thorne v Kennedy stated that in a determination of undue influence:-
32.…It is not necessary for a conclusion that a person’s free will has been substantially subordinated to find that the party seeking relief was reduced entirely to an automaton or that the person became a “mere channel through which the will of the defendant operated”. Questions of degree are involved. But, at the very least, the judgmental capacity of the party seeking relief must be “markedly sub-standard” as a result of the effect upon the person’s mind of the will of another.
Further, at [43] their Honour’s explained:-
…[I]n undue influence there will be questions of evaluative judgment involved in assessing whether the extent to which a person’s will has been subordinated to another’s is sufficient to characterise the person as lacking free will…
In relation to unconscionable conduct, the plurality in Thorne v Kennedy stated that the enquiry must result in a finding that:-
38.…the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests”. The other party must also unconscientiously take advantage of that special disadvantage…
In the context of financial agreements, the High Court held the following factors and considerations were relevant:
(i)whether the agreement was offered on a basis that it was not subject to negotiation;
(ii)the emotional circumstances in which the agreement was entered including any explicit or implicit threat to end a marriage or to end an engagement;
(iii)whether there was any time for careful reflection;
(iv)the nature of the parties’ relationship;
(v)the relative financial positions of the parties; and
(vi)the independent advice that was received and whether there was time to reflect on that advice.
That a party to the financial agreement was advised not to sign the agreement, but did so anyway, may indicate undue influence upon that party.
It was submitted on behalf of the husband that the fact that the husband signed the Second Agreement only shortly before the parties’ wedding created a circumstance of urgency and provided him with minimal time to consider the agreement or his lawyer’s advice in relation to the agreement. The husband deposes that he “did not read the second Agreement properly”[17] and that he was “very rushed” to sign it as the parties were to marry soon after.[18]
[17] Husband’s affidavit filed 5 July 2022, paragraph 19.
[18] Husband’s affidavit filed 5 July 2022, paragraph 21.
Those submissions ignore the fact that the Second Agreement was prepared by the husband’s lawyer and not the wife’s. Absent evidence to the contrary, in my view the only inference to be drawn from that fact is that the Second Agreement was prepared upon the husband’s own instructions. That view is supported by the Letter of Advice prepared by the husband’s lawyer, which indicates their view that the Second Agreement is not “fair and reasonable” to the wife and that if she sought to set it aside, she would likely succeed.
The schedules of assets annexed to the Second Agreement indicate that there was a significant disparity in the parties’ financial circumstances, and that the husband was in a much stronger financial position than the wife. Further, at the time of its execution, the husband was aged 47 years and the wife was aged 29. Having regard to those matters I am satisfied that if there was a power imbalance between the parties, it favoured the husband and not the wife.
I am satisfied that on its face the terms of the Second Agreement significantly favour the husband; he is to retain all of the property held by him at the commencement of the relationship, which he valued in excess of $3,500,000 at the date of the agreement, as compared with the wife’s assets then valued at $40,000. Only property acquired during the relationship is to be shared by the parties, in the proportions reflected on title and where not specified, jointly. In the event of a separation, the husband is required to pay to the wife the sum of $100,000 if separation occurs prior to the second anniversary of the marriage, and if greater than two years, an additional $50,000 for each completed year.
Notwithstanding his complaints about the Second Agreement, the husband confirmed in his affidavit that in accordance with Clause HH of the Second Agreement, he paid to the wife $500 per week for her own use and expenditure from 2006 to 2013 inclusive.[19] During his oral evidence, the husband resiled from his sworn evidence as to those payments and stated that he made them voluntarily and that they were not related to the Second Agreement.
[19] Husband’s affidavit filed 5 July 2022, paragraph 26.
I do not accept the husband’s oral evidence as to the alleged voluntary payments. Given the matters deposed to by him in his affidavit as to the payments being made pursuant to the Second Agreement, coupled with the wife’s evidence of those matters, and in circumstances where those payments were made over a period of seven years and were in amounts identical to the husband’s obligations under the Second Agreement, I am satisfied that they were made in compliance with the Second Agreement. In my view, the husband has been less than frank with the Court as to the circumstances in which those payments were made.
Whilst the Second Agreement was executed by the parties within a few days of their marriage, all of the evidence supports a finding that the terms of that agreement weighed heavily in favour of the husband, and as such any disadvantage in entering it was to the wife, who now seeks its enforcement. I am satisfied that the Second Agreement was drawn by the husband’s lawyer on his terms and as observed by the husband’s lawyer, favoured him. Accordingly, I am not satisfied that the husband was subject to undue influence or unconscionable conduct as alleged.
Having regard to the above matters, the husband’s application to set aside the Second Agreement will be dismissed.
I certify that the preceding one hundred and five (105) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Johns. Associate:
Dated: 26 February 2024
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